Notes:

Time Unlike goods, services cannot be stored for later use. The capacity must be available to produce a service at the time when it is needed. For example, a customer cannot be given a seat that went unoccupied on a previous airline flight if the current flight is full. Nor could the customer purchase a seat on a particular day's flight and take it home to be used at some later date.

Location The service capacity must be located near the customer. In manufacturing, production takes place, and then the goods are distributed to the customer. With services, however, the opposite is true. The capacity to deliver the service must first be distributed to the customer (either physically or through some communications media such as the telephone); then the service can be produced. A hotel room or rental car that is available in another city is not much use to the customer—it must be where she is when she needs it.

Volatility of Demand The volatility of demand on a service delivery system is much higher than that on a manufacturing production system for three reasons. First, as just mentioned, services cannot be stored. This means that inventory cannot be used to smooth the demand as in manufacturing. The second reason is that the customers interact directly with the production system—and each of these customers often has different needs, will have different levels of experience with the process, and may require different numbers of transactions. This contributes to greater variability in the processing time required for each customer and hence greater variability in the minimum capacity needed. The third reason for the greater volatility in service demand is that it is directly affected by consumer behavior. Influences on customer behavior ranging from the weather to a major event can directly affect demand for different services. Go to any restaurant near your campus during spring break and it will probably be almost empty. Or try to book a room at a local hotel during Homecoming weekend. This behavioral effect can be seen over even shorter time frames such as the lunch-hour rush at a bank's drive-through window or the sudden surge in pizza orders at Domino's during half-time on Superbowl Sunday. Because of this volatility, planning capacity in services is often done in increments as small as 10 to 30 minutes, as opposed to the one-week increments more common in manufacturing.